Tuesday, November 8, 2016

Ontario's New Pension Leader?

The head of Infrastructure Ontario (IO) has quietly left the government agency to run a massive new $50-billion public pension corporation.

Bert Clark, who had been president and CEO of the province’s infrastructure arm for more than four years, departed last month for the fledgling Investment Management Corporation of Ontario (IMCO), which will pool and manage public-sector pension funds.

Its founding members are the Ontario Pension Board (OPB) — which administers pensions for provincial government employees and those at agencies, boards and commissions — and the Workplace Safety and Insurance Board (WSIB).

An executive search has begun for Clark’s permanent replacement.

Toni Rossi, divisional president for real estate and lending, is serving as acting president and CEO of the infrastructure agency that is responsible for overseeing the financing and construction of schools, bridges, hospitals, court houses, and public transit projects.

“Bert has been a driving force at IO and made significant contributions to our success. He has demonstrated the potential for the public and private sectors to work together on infrastructure and real estate, and the benefits of doing so. We wish him all the best in his new role at IMCO,” Linda Robinson, IO’s board chair, said in an email Monday.

A former Scotiabank managing director and one-time aide to former premier Dalton McGuinty, Clark is the son of Ed Clark, Premier Kathleen Wynne’s business guru.

In a statement, the WSIB welcomed his appointment as the first CEO of the new corporation effective Oct. 17.

“The WSIB is confident that Mr. Clark’s experience in both the public and private sectors will prove valuable in his leadership of IMCO,” the board said.

“We anticipate a successful partnership which will allow the WSIB to strengthen its investment performance and asset management capabilities to provide secure benefits for workers and maintain stable premium rates for employers.”

The new investment management corporation, which is not bankrolled by the government or taxpayers, will operate as an arm’s length, member-funded, non-profit corporation.

It is expected that other public-service pension funds may eventually join the corporation which was set up in July and will begin its investment operations next year.

Finance Minister Charles Sousa said last summer that it would “enable public-sector organizations to pool assets and create economies of scale.”

“This will increase efficiency when providing pension support and income for injured workers. OPB and WSIB — and public-sector pension plans that may join in the future — will benefit from IMCO’s ability to deliver enhanced services,” he said.

Ontario is working to improve the management of broader public sector investment funds, including public sector pensions, through the creation of the Investment Management Corporation of Ontario (IMCO), which will provide investment management and advisory services to participating organizations in Ontario's Broader Public Sector (BPS).

Established July 1, 2016 by proclamation of the Investment Management Corporation of Ontario Act, 2015, IMCO will enable BPS organizations to lessen costs by pooling their assets. The larger fund is expected to lower administrative costs, which will help improve return on investments.

The creation of this entity is another step forward in fulfilling Ontario's commitment to strengthen the retirement income system for Ontario's workers. Since 2013, the province has advocated for an enhancement to the Canada Pension Plan. Ontario's sustained leadership on this critical issue, as well as the collaboration with the federal government, provinces and territories, resulted in the recent agreement-in-principle on a national solution, signed on June 20th in Vancouver. With this consolidated approach and creation of IMCO, Ontario is modernizing workplace pensions by providing a new tool for the investment of retirement savings.

The founding members of the IMCO are the Ontario Pension Board (OPB) and the Workplace Safety and Insurance Board (WSIB). With combined investment assets of approximately $50 billion, these two institutions provide the scale to ensure IMCO's success. IMCO is designed to accept, through a managed process, the membership application of any BPS organization with an investment fund that is interested in accessing its services.

IMCO will not require financial support from the Ontario government or Ontario taxpayers and will operate at arm's length from government as a member-based non-profit corporation. The creation of IMCO fulfills a commitment made in the 2015 Ontario Budget. It is expected to be operational by Spring 2017.

Three of the IMCO's initial Board of Directors were appointed July 1 by the Minister of Finance, including David Leith as Chair. The WSIB and OPB have each appointed two Directors to the initial Board. The new board's main priority will be to prepare the corporation to manage members' funds in the spring of 2017.

Strengthening workplace pension plans is part of the government's economic plan to build Ontario up and deliver on its number-one priority to grow the economy and create jobs. The four-part plan includes helping more people get and create the jobs of the future by expanding access to high-quality college and university education. The plan is making the largest infrastructure investment in hospitals, schools, roads, bridges and transit in Ontario's history and is investing in a low-carbon economy driven by innovative, high-growth, export-oriented businesses. The plan is also helping working Ontarians achieve a more secure retirement.

Quick Facts

Participation of public sector and broader public sector (BPS) organizations in IMCO will be voluntary.

Members of IMCO will retain ownership of their assets and responsibility to determine how their assets are invested by IMCO.

The Ontario Pension Board (OPB) is the administrator of the Public Service Pension Plan (PSPP), a major defined benefit pension plan sponsored by the Government of Ontario. PSPP membership is made up of employees of the provincial government and its agencies, boards and commissions. At the end of 2015, OPB had $23 billion worth of assets under management.

The Workplace Safety and Insurance Board (WSIB) is an independent agency that administers compensation and no-fault insurance for Ontario workplaces. At the end of 2015, WSIB had $26.3 billion worth of assets under management.

IMCO will be headquartered in Toronto, the second-largest North American financial services centre by employment after New York.

I have not discussed the creation of the Investment Management Corporation of Ontario (IMCO) because truth be told, the details were murky and it's not even operational yet (suppose to begin operations in the Spring 2017).

But just by reading the details, I can see why this new pension plan is described as "fledgling" in the article above. I have a lot of questions like why is it voluntary, who are the board members, how are they appointed to ensure they are qualified and independent, and who will help Bert Clark at IMCO?

I can make a few recommendations but my number one recommendation for CIO of IMCO is Wayne Kozun, an Investment Management Executive with over twenty years of experience at Ontario Teachers' Pension Plan, leading several different departments (click on image):

Wayne recently left OTPP (not sure as to exactly why) but he is an outstanding investment professional with years of experience at one of the best pension plans in the world and he lives in Toronto. Not sure what he wants to do next but he would be a great chief investment officer.

As far as IMCO's board members, I think they should nominate Carol Hansell to the board as she has tremendous experience at PSP Investment's board during the ramp-up phase and is highly qualified to sit on this board (click on image):

Again, I am assuming she actually wants to sit on this board (have no idea) but if I was advising OPB, WSB and Ontario's Ministry of Finance, I would highly recommend Wayne Kozun as a CIO of IMCO and nominate Carol Hansell to its board.

As far as Bert Clark, I don't know him but he is the son of Ed Clark, a titan of finance in Canada's banking industry (Ed Clark was the former CEO of TD Bank, has a stellar reputation and is now advising Ontario Premier Kathleen Wynne on business issues, including finding other revenue sources for the cash-strapped province).

I'm sure Bert Clark is very qualified to lead this new Ontario pension but the reality is it sure helps that he is the son of one of Canada's most powerful banking CEOs ever who is now advising Ontario Premier Kathleen Wynne on "business issues". Don't tell me that didn't help Bert Clark get this nomination.

Sure, Bert Clark has excellent experience as the head of Infrastructure Ontario (IO) but there are many people living in Toronto who are far more qualified to head this new pension plan. I'm a little surprised someone with more pension experience was not placed as the head of Investment Management Corporation of Ontario (IMCO).

Please note I made a HUGE mistake in an earlier version of this comment assuming the federal government had named Bert Clark as the leader of the federal government's new infrastructure bank (that would have made a lot more sense!).

My sincere apologies, this is what happens when you are trading and blogging at the same time, the two don't mix well and I read the article all wrong. This was my mistake but my recommendations on Wayne Kozun and Carol Hansell still stand.

As far as Bert Clark, he now has a tough job heading up this new pension plan which quite frankly should be mandatory, not voluntary and I don't know exactly how it will operate going forward but as long as they get the governance right, hire the right people and compensate them properly and nominate an independent and qualified board of directors, it will all work out well.

So, I welcome Bert Clark as the new head of Investment Management Corporation of Ontario (IMCO) and apologize for my earlier goofball mistake of thinking he was named the head of Canada's new infrastructure bank (even if that would have made more sense).

One thing we can all agree on is that Ontario has taken the lead over every other province in terms of providing safe, secure workplace pensions and this is yet another example of why this province (rightly) takes pensions very seriously.

I love his message in both these clips (especially the first one) and think all of Canada's large pensions and public and private organizations can learn a lot from them.

Bert Clark's father is a legend in Canada's financial services industry, someone who can and will advise him as needed when he assumes his new role heading up the Investment Management Corporation of Ontario.

In that respect, Bert Clark is very lucky to have his father to consult with if he needs solid advice. I wish him the best of luck in this important new role and hope he surrounds himself with great people.

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I am an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. I have researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). I've also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system. You can follow my blog posts on your Bloomberg terminal and track me on Twitter (@PensionPulse) where I post many links to pension and investment articles as well as my market thoughts and other articles of interest.

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